Is digital banking paying off ?

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Delivering services through use of technology has helped manage operational risk

India is still a cash-driven economy and, hence, the opportunity to go digital is huge. But each of these players will have to find their niche and compete on the turf says Rajiv Anand.Excerpts:

The banking industry is at the cusp of a digital revolution. What are ways in which technology is changing banking experience both for banks as well as customers?

The incumbent banks have been built on a brick and mortar model, and are now going digital. For banks like us, the mindset has already changed.

The focus on delivering products and services through use of technology has helped in managing operational risk. It has also increased our ability to take on more digital transactions. Hence it's pertinent to ensure that the solutions we build can handle the increasing load of transactions online while keeping the cost per transaction low. With technology, it's possible to do so and we are already seeing benefits across verticals.

All banks have a mobile app now, but for a customer, it is important that the interface offers a seamless experience. For instance, we enabled booking of lockers through mobile some years back; weconverted a physical experience into a seamless digital one.

Customers can get instant personal loans, convert credit card transactions into EMI payments, buy mutual funds, get offers available on online purchases and ticket booking etc. Hence, a customer can use the mobile for multiple services.

Technology has also helped us improve productivity. We are now able to open accounts through eKYC, Aadhar etc. All of this sits on a bedrock of data, which helps us to serve our customers better through analytics.

How are you managing threat from fintech players/start-ups?

We have set up our own innovation lab in Bangalore called ‘Thought Factory’ which has an inhouse innovation team. We also have an accelerator,where we curate and work with select startups.

We picked up six start-ups last year to work with at the accelerator. We also do problem-specific hackathons across the country; in fact we've also done hack for hire to recruit from the start-up community. So we clearly recognise the innovation start-ups bring in and collaborate wherever possible.

New format banks such as payments banks have a more lean cost structure and can offer services in a more cost-efficient way. How can traditional banks such as Axis Bank compete with them on cost?

Banks such as ours offer an entire gamut of services through branches, ATMs, as well as digital channels. Payments banks may offer a differentiated payment experience but they cannot lend. Hence, while their cost may be low, it needs to be seen what kind of customer proposition they offer.

In the Indian context, we are still a cash-driven economy and, therefore, the opportunity to convert transactions into digital is huge, but each of these players will have to find their niche and compete on the turf.

Small finance banks, on the other hand, have a more defined business model that is probably more amenable to success.

But these banks offer perks of higher savings rate or no minimum balance charge….

We at Axis Bank also have zero balance accounts and offer higher rates on high value deposits, but consumer insights show that for customers, full banking experience is equally important, which we are able to offer through our multiple channels. I don’t think higher rates or lower fees can be differentiators.

You mentioned that we are mainly a cash-driven economy. How do you nudge customers to go digital, given the numerous charges that banks levy on digital transactions? Cash is still zero cost for customers.

The new age digital transaction platforms like UPI are already zero cost for customers and we've seen the exponential growth in UPI transactions, as it's getting integrated across native social media platforms. I think a huge nudge to go digital would come when banks are present on platforms which are ‘slice of life'. As you may know, we have created a robust UPI tech platform through which we are on multiple such platforms, including uber, ola, redbus, which consumers use on a daily basis.

For other modes, ultimately, transaction charge needs to be borne by somebody. In the case of POS (point-of-sale) transactions, while it's free for customers, the cost is borne by merchants. In case of cash, the cost is borne by the bank.

However, the Centre is pushing us to dis-incentivise cash transaction. From unlimited ATM cash withdrawals earlier, such transactions were capped sometime back. As the controls tighten, the perceived zero cost of cash will go away.

Recently, there has again been a lot of uproar on bank charges, particularly on non-maintenance of minimum balance. What is the rationale for banks to levy this charge in the first place?

For the requisite minimum balance, we offer customers access to a large network of branches, ATMs and mobile capabilities. Also, with every level — that is, for a ₹10,000 or ₹20,000 minimum balance account, the services we offer are in effect much more than the charges levied. Also, the minimum balance charge levied nowadays is ad valorem,based on the value of shortfall.

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